Late payments: your rights and what to do about them

Late payments are not a "you" problem

If clients owe you money right now, you're not alone. A 2025 report found that 62% of UK small businesses are owed money from unpaid invoices, with an average of £21,400 outstanding per business. That's not a minor inconvenience — it's a cash flow crisis.

Late payments cause real harm. They force freelancers to dip into savings, delay their own bills, and take on work they wouldn't otherwise accept just to cover the gap. It's the number one financial stress for self-employed people in the UK.

But the law is on your side. Here's what you can do about it.

Your legal rights (they're stronger than you think)

Under the Late Payment of Commercial Debts (Interest) Act 1998, you have the legal right to:

• Charge statutory interest on any invoice paid after the agreed terms. The rate is the Bank of England base rate + 8%.
• Claim compensation for the cost of recovering the debt: £40 for debts up to £999.99, £70 for debts £1,000-£9,999.99, and £100 for debts over £10,000.

You don't need to go to court to claim this. You just add it to a follow-up invoice. Most freelancers don't know about this right. Now you do.

How to calculate statutory interest

At the time of writing, the Bank of England base rate is around 4.5%. So the statutory interest rate would be 12.5% per year, or roughly 0.034% per day.

On a £2,000 invoice that's 30 days late, that's about £20 in interest. Not life-changing on its own, but it sends a clear signal that you take your payment terms seriously.

What's changing in 2026

The UK government is introducing the most significant late payment reforms in over 25 years. Here's what's coming:

• Maximum 60-day payment terms — companies can no longer push freelancers to accept 90 or 120-day terms. The government is also considering reducing this to 45 days in future.
• 30-day dispute deadline — if a client disputes an invoice, they must raise it within 30 days. No more sitting on invoices for months and then claiming there was an issue.
• Mandatory statutory interest — the payment of interest on late invoices is being strengthened so it can't be contracted out of in unfair terms.
• Stronger Small Business Commissioner (SBC) — the SBC will gain enforcement powers, including the ability to issue financial penalties to companies that persistently pay late.

How to chase late payments (without ruining the relationship)

Chasing money is uncomfortable. But it doesn't have to be confrontational. Here's a tested escalation approach:

Reminder 1: On the due date

"Hi [name] — just a heads up that invoice [number] for [amount] is due today. I've attached it again for your convenience. Let me know if you need anything from my end."

Reminder 2: 7 days overdue

"Hi [name] — following up on invoice [number] which is now a week overdue. Could you confirm when payment will be processed? Happy to chat if there's an issue."

Reminder 3: 14 days overdue

"Hi [name] — invoice [number] is now 14 days past due. As per our agreed terms, I'd appreciate prompt payment. Please note that under the Late Payment of Commercial Debts Act, statutory interest may apply to overdue invoices."

Formal notice: 30 days overdue

"Dear [name] — This is a formal notice regarding invoice [number] for [amount], which has been outstanding for 30 days. Under the Late Payment of Commercial Debts (Interest) Act 1998, I am entitled to charge interest at [X]% per annum, plus a fixed compensation of [£40/£70/£100]. I expect full payment within 7 days. If I do not receive payment, I will escalate this matter to the Small Business Commissioner."

Prevention is better than chasing

The best way to deal with late payments is to reduce the chances of them happening:

• Take a deposit before you start work (30-50% is standard)
• Use shorter payment terms (14 days, not 30)
• Include late payment terms in your contract — clients who know the consequences are more likely to pay on time
• Offer payment links — the easier you make it to pay, the faster it happens
• Invoice immediately — don't wait days or weeks after delivering the work

You have more power than you think

Late payments feel personal. They're not. They're a systemic issue in the UK economy, and the law is increasingly stacking in your favour.

Know your rights. Put them in your contracts. Follow up promptly. And don't feel guilty about expecting to be paid for work you've already done.